Korea: An Economy Growing Again

Speech by Minister for Trade The Hon Mark Vaile MP to the Ministerial-CEO Roundtable Australia-Korea Business Council

Intercontinental Hotel, Sydney, 16 September 1999

(Check Against Delivery)

Thanks Paul Jeans for your welcome. Minister Chung, Mr Park Se-yong, and guests from Australia and Korea. To all our visitors, a special welcome to Sydney!

Sydney in spring is in full bloom, and the Olympics are but a year away. And this year, in another Olympic city - Seoul - we've seen a different kind of spring.

Consumers are consuming and investors are - at last - investing. The Korean economy is well and truly on the rebound. The Australian economy, meanwhile, has just achieved its ninth quarter of economic growth above 4 per cent in through-the-year terms, our best result for almost a quarter of a century. And the trade outlook between our two countries has improved significantly in just one year.

Australia-Korea economic relations

Trade is a bedrock upon which strong international relationships are built, and the strong complementarity between Australia and Korea has made for a trade relationship that is dynamic and ever-expanding.

At the beginning of the 1970s, trade between our countries was valued at a mere A$40 million. Today, despite the recent economic downturn in Korea, bilateral trade exceeds A$10 billion.

To keep that trade flowing, Australia was very active in its support of Korea during the economic crisis. To help Korea overcome its financial difficulties, we joined with other countries to provide funding - in Australia's case $US1 billion - to supplement the international financial package put together by the IMF. In addition, our Export Finance Insurance Corporation provided export insurance cover of A$500 million during the crisis, to ensure that Korean firms could continue to have access to vital Australian raw material supplies, for example, coal needed for Korean industry and exports.

Korea is Australia's 3rd largest trading partner. Australia is Korea's 5th largest trading partner. We are not fair-weather friends - we are all-weather friends, and our relationship is an enduring one.

Bilateral trade has traditionally been based on exports of raw materials and intermediate products from Australia, and of passenger motor vehicles and electronics from Korea. Those products were the bedrock of our trade during the economic crisis and will, I am sure, continue to underpin the relationship for many years to come.

But Australian exports to Korea are not just limited to raw materials and intermediate products. With economic restructuring in Korea, new opportunities are arising for Australian suppliers of manufactured goods and services.

For example, deregulation and liberalisation of Korean financial markets is leading to new areas of cooperative endeavour. Australian banks and accounting firms are now working with Korean banks on restructuring plans and the introduction of Western management.

The story is the same in corporate restructuring. To take a recent example, the Australian law firm, Freehill, Hollingdale & Page, is to be congratulated for its hard won contract to advise on the restructuring of Korea's electricity utility, KEPCO. These developments are broadening the character of the economic relationship in a very positive way.

It is fair to say that investment links have not been a strong point of the relationship. We welcome the significant liberalisation of Korean investment policies and attitudes. Australian companies are generally not into big merger and acquisition activity but there is growing interest in joint ventures with Korean companies in the food, transport, IT and financial sectors, to mention a few. These follow the flagship investment by Australian company Coca-Cola Amatil.

The visit by President Kim Dae-jung and his Ministers reflects a strong commitment to build on these existing links and to forge new ones. Not only is the bilateral relationship strong, but the economic outlook for Korea in particular and the region in general is good.

Economic outlook for East Asia

Korea's remarkable turnaround in growth in 1999 is the clearest example of the benefits of economic reform shown by any country affected by the economic crisis. The reforms put in place by Kim Dae-jung's Administration have been the single greatest factor in attracting foreign investors back to Korea.

The recent rebound in Korea has been welcome news, but the recovery process elsewhere in East Asia still remains fragile.
I am also concerned about the signs of protectionism in some OECD economies, particularly in sectors such as agriculture and steel. Protectionism and trade frictions could put back recovery in the region, and Australia is working intensively in APEC and the WTO to keep the trade liberalisation bicycle moving forward around the globe.

Open markets are an important driver of economic growth internationally. And further opening of markets is a key objective for Australia at the forthcoming Seattle WTO Ministerial Meeting in November.

Australia's trade objectives for Seattle

The Australian Government is working towards the launch of a new round of WTO negotiations in Seattle.

As a major agricultural exporter, and chair of the Cairns Group, a successful outcome on agriculture is a major objective for Australia. It is difficult, however, to see how we might achieve major gains in isolated negotiations on agriculture.

Importantly, APEC delivered a strong message from Auckland that negotiations should include comprehensive market access negotiations covering industrial tariffs in addition to agriculture and services - negotiations already mandated from the Uruguay Round. Focusing on market access will maximise the chances for a successful and short - three year - round. Australia believes that if more complex issues are added, the three year time frame will become more difficult.

Conclusion

As our two countries move into a new century, we take with us a very positive legacy. Our experience of close and beneficial cooperation in trade, politics and security over the past century serves as an unshakable foundation for our bilateral relationship.
Australia and Korea have stood side by side in war, and in peace. We've achieved much, but there is so much more waiting for us.

I look forward, therefore, to working closely with Minister Chung on developing the full potential of commercial links between our countries. And I look forward to hearing from today's discussions about practical steps we can take to make that potential a reality.